California committee drops bill to eliminate corn ethanol funding

By Kris Bevill | May 04, 2011

The California State Assembly Committee on Transportation voted 6-3 on May 2 to defeat a bill that would have repealed the state’s ethanol producer incentive program (CEPIP) and made corn ethanol projects ineligible for state funding. The bill, AB 523, was introduced in February by Republican Assemblyman David Valadao and passed by a narrow margin in the State Assembly Committee on Natural Resources on April 25. 

Although AB 523 had the support of a large number of environmental, livestock and food groups, Valadao blamed lobbyists for other state unions and the ethanol industry for pressuring Democratic members of the transportation committee not to pass the bill. “I had been warned about how business gets done in Sacramento, but even I was surprised to find such opposition for a bill addressing rising food costs,” he said. “The opposition claimed that this bill would have cost jobs, but they failed to acknowledge the thousands of good-paying agriculture jobs that corn ethanol has cost the state of California. The environmental and scientific community agrees that corn ethanol is bad for the environment, but apparently not bad enough to overcome the influence of a handful of ethanol producers in Sacramento.”

The CEPIP program went into effect in January and provides producers with incentive payments based on the ethanol crush spread. When margins are low, they receive payments. But during times of improved margins, producers are required to re-pay money they have previously received. The program also requires producers to invest in technology to transition away from corn in favor of non-food, low-carbon feedstocks. Three ethanol producers currently qualify for the program—Pacific Ethanol Inc., Calgren Renewable Fuels LLC and AE Biofuels Inc. All three companies have been very outspoken against eliminating funding for corn ethanol and have said they are aggressively working on the commercialization of cellulosic ethanol, but further support of corn ethanol is necessary in the meantime.

Tom Koehler, policy advisor for Pacific Ethanol, said that in defeating Valadao’s bill, the transportation committee has reconfirmed the state legislature’s position on corn ethanol. “[C]orn ethanol production in California provides the lowest carbon fuel in the nation, reduces gas prices, provides the lowest cost highest value feed products to the California livestock industry, and are innovative manufacturing plants leading the way to next-generation advanced biofuels,” he said. “These plants are job creation machines and the CEPIP program is directly responsible for stimulating innovation and jobs.”

According to Koehler, Valadao is attempting to influence federal ethanol policy through California legislation. “The only problem with that approach is, while he might be trying to send a message to D.C. he is actually shooting California jobs, innovation and the livestock industry in the feet,” Koehler said. “We are willing partners to work together on the federal level, which is the appropriate forum for these issues. But let’s keep the jobs, innovation and high-value feed production in California.”

Valadao’s bill was approved for reconsideration by the transportation committee, which means he’ll have the option to bring it up again next January. So far, it appears he intends to do so. “This is not over,” he stated. “Corn ethanol is bad public policy. I look forward to continuing my effort to eliminate state funding for it. Ultimately, this bill being defeated is bad news for those that consume food, work in agriculture, or care about the environment and good news for a small group of wealthy corn ethanol producers.”